AI’s Paradox: Smart Chatbots Make Banking Feel Human Again

Before digital, banking was personal. You’d go to your local branch where your banker got to know you and your financial profile, including your credit history, income, and overall financial situation. This made it easy for them to suggest personalized product offers based on your current financial context, making you feel as though your needs are understood.

However, for millennial generations, doing business with a bank face-to-face is a thing of yesteryear. They expect seamless access to banking on digital channels. In fact, a recent study found that an impressive 73 percent of millennials prefer using digital banking services than going to a bank.

Banking industry was traditionally slow to adopt the latest innovations but this massive shift in consumer behavior and the growing competition from nimble fintech startups made them speed up the digitization process. So we are now seeing financial technology fundamentally changing the way we interact with our banks.

And while some things got better (digital banking is easy, convenient, transparent, etc.), personalized approach got lost in translation. The banking industry somehow forgot that most people have emotional relationship with money.

Banks still need to show they understand this and that they are able to meet our financial needs with contextually-aware offers. Unless the digital banking services are personalized for our particular needs, the experience we have with our banks will still be poor.

Customers get personalized experiences in so many other areas (think Netflix, Amazon, etc.) and they have the same expectations for their financial institutions.

Why banks should adopt AI and conversational banking

The ideal scenario for banks would be to leverage their digital channels and technology to enable personalized interaction with customers based on past behaviors and expressed goals.

They need to understand their customer’s journey and make informed (and ideally real-time) decisions as to what the most valuable offer/recommendation for that customer should be.

Banks that don’t have this capability are pouring a lot of money into wrong aspects of ‘digitization’ that customers either consider a standard or don’t really care about.

Chatbots are efficient, cost-effective way for banks to scale personalized conversations with their customers through popular messaging channels like Facebook Messenger, Telegram or Skype. They enable banks to introduce conversational capabilities that deliver transparent, meaningful experiences while keeping the human touch in their services.

According to a study by Mastercard, two-thirds of American adults are already comfortable interacting with banks and businesses via chatbots. So adoption is no longer an issue.

Although this seems ironic, AI could actually help banks create a more human-like customer experience. Chatbots are bringing two-way interactions back to digital banking giving people the impression that the bank understands their needs and expectations.

It’s no longer just a transactional relationship. Banks can now establish genuine relationships with their customers while providing a more lightweight experience and on channels that matter to their customers the most.

What can banking chatbots do?

To provide more personalized experiences, banks need to implement chatbots that understand not only what the user is trying to say, but also their context.

Luckily, technologies that power intelligent banking chatbots (machine learning, NLP and sentiment analysis) can be leveraged to combine historical interactions with current customer data to proactively provide personalized support, offers, or information like never before.

Thanks to this, chatbots can also support more complex interactions, meaning they can (or at least try to) emulate human-to-human conversations.

Now, let’s look at some of the chatbots use cases for banks and how they put human touch back into banking:

Personal finance advice. A banking chatbot will “learn” customer spending habits by analyzing past transactions. It will then leverage this data to provide budget planning advice and tips to help customers manage their finances more efficiently. This is something that’s currently missing from a typical digital banking experience!

Fraud prevention. A smart banking bot can be trained to recognize warning signs of fraud so it can notify the affected customer in real time. If the customer verifies the fraud, the chatbot then advises next steps for fraud resolution. Quite a caring approach, wouldn’t you think?

The right offer at the right time. Banking bots can deliver personalized offers, products, and services to customers based on their profile data or important life events. These highly-targeted offers delivered at the right time can increase conversion rates. More importantly, customers will feel like the bank understands their unique situation and current financial needs.

Customer service. With a support chatbot available, customers no longer need to call banks or search through bank’s help documentation . Instead, they can get answers to their questions from a chatbot that’s available to resolve their issues 24/7.

Summary

Banks are going full-on digital to introduce innovation across products and business models and remove clunky systems and outdated practices that aren’t fit for the digital world.

But unless they focus on customer needs and expectations to remove their frustrations with not just the tasks in the digital banking environment (e.g. opening accounts, transferring funds, etc.), but also the entire experience that feels impersonal and disjointed, digital technology itself will not make a big difference.

However, as AI and cognitive systems become more advanced, chatbots will become smarter over time giving banks the opportunity to facilitate deeper, more meaningful customer relationships and build brand differentiation, higher loyalty, and retention.

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